Description of the event
The company released its 2023 annual report and 2024 quarterly report: in 2023, the company achieved operating income of 78.112 billion yuan, an increase of 13.43% over the previous year; realized net profit of 27.239 billion yuan, an increase of 14.81% over the previous year. In the first quarter of 2024, the company achieved operating income of 15.641 billion yuan, an increase of 1.58% over the previous year, and realized net profit to mother of 3,967 billion yuan, an increase of 9.80% over the previous year.
Incident comments
Electricity capacity continued to be repaired, and annual performance achieved steady growth. In 2023, the total amount of incoming water from the Wudongde Reservoir in the upper reaches of the Yangtze River was about 102.908 billion cubic meters, 5.46% less than the same period last year; the total amount of incoming water from the Three Gorges Reservoir was about 342,846 billion cubic meters, which was 0.71% higher than the same period last year. Although the incoming water is not very good, since the Baihetan Power Station was not fully completed and put into operation in the same period last year, the company's total power generation capacity in 2023 was about 276.263 billion kilowatt-hours, an increase of 5.34% over the same period last year. The company's share of marketable electricity reached 37.76%, an increase of 3.8 percentage points over the previous year. Since electricity prices at Baihetan Power Station are higher than the company's other power stations, the company achieved operating income of 78.112 billion yuan for the full year of 2023, an increase of 13.43% over the previous year, which is superior to the electricity growth rate. The company's gross margin was 57.83%, an increase of 0.7 pct over the previous year. Furthermore, driven by the steady operation of participating companies, the company's investment income reached 4.750 billion yuan, an increase of 3.26% over the previous year. In terms of profit reduction factors, due to the company's acquisition of the Wubai Power Station and extensive borrowing, the company's financial expenses reached 12.556 billion yuan, an increase of 31.05% over the previous year, and R&D expenses also reached 789 million yuan, a sharp increase of 779.95% over the previous year, which limited the growth rate of performance to a certain extent. Overall, the main business restoration performance was still strong, with annual results reaching 27.239 billion yuan, an increase of 14.81% over the previous year. The company plans to pay a cash dividend of 8.20 yuan (tax included) for every 10 shares, with a dividend rate of 73.66%. The dividend level is stable.
Incoming water has limited hydropower output, and the cost reduction and revenue growth performance is better than expected. In the first quarter of 2024, the total amount of incoming water from Wudongde Reservoir in the upper reaches of the Yangtze River was about 14.849 billion cubic meters, 7.71% less than the same period last year; the total amount of incoming water from the Three Gorges Reservoir was about 49.767 billion cubic meters, 4.14% lower than the same period last year. Affected by dry incoming water, the total power generation capacity of the company's six cascade power plants was about 52,747 billion kilowatt-hours, a decrease of 5.13% over the same period last year. Although electricity performance is under pressure, the electricity price mechanism for some of the company's power plants was clarified last year, and electricity prices may have increased this year due to the confirmed time rhythm. At the same time, electricity prices left in Sichuan and Yunnan during the dry water period of the company are also expected to increase as electricity prices increase year-on-year in the two provinces during the dry season, thanks to the company's operating revenue of 15.641 billion yuan in the first quarter, an increase of 1.58% over the previous year. In terms of cost, since the Wubai Power Station began to convert a large number of fixed assets at the beginning of last year, the company's operating costs in the first quarter reached 8.112 billion yuan, an increase of 4.31% over the previous year, resulting in the company's gross profit of 7.529 billion yuan, a decrease of 1.20% over the previous year. However, the company continued to optimize its debt structure. Financial expenses for the first quarter were 2,851 billion yuan, a decrease of 9.40% year on year. Driven by a significant recovery in the operating performance of participating companies, investment income in the first quarter reached 900 million yuan, an increase of 55.73% year on year. Driven by increased cost reduction and a sharp increase in investment income, the company achieved net profit of 3,967 billion yuan in the first quarter, an increase of 9.80% over the previous year. Against the backdrop of pressure from incoming water, steady performance showed the company's excellent investment value.
Investment advice: According to the latest financial data, we have adjusted the company's profit forecast. We expect the company's corresponding EPS for 2024-2026 to be 1.34 yuan, 1.37 yuan, and 1.46 yuan, respectively, and the corresponding PE will be 19.08 times, 18.57 times, and 17.45 times, respectively, maintaining the company's “buy” rating.
Risk warning
1. The risk of electricity price fluctuations;
2. The risk of incoming water falling short of expectations.